Recovery Rebate Credit

What is the Recovery Rebate Credit?

The Recovery Rebate Credit is a new tax credit added to the 2020 IRS Form 1040. The stimulus payments were an advance, or pre-payment, of this credit. Credits – even when they come in advance - are not taxable on your return.

By completing the Recovery Rebate Credit section in TaxAct, you can verify that you received all the funds you qualified for. For most, the amounts received were accurate.

If you do have more stimulus money coming to you, the remaining amount will be added to your tax refund. If you owe taxes, the remaining amount will be subtracted from what you owe. TaxAct will calculate your Recovery Rebate credit to make sure you received all the stimulus money you qualified for.

The benefit of reporting your stimulus payment on your tax return

Reporting the amount of stimulus money you received helps you make sure you got everything you qualified for. If you received more than you qualified for don't worry - you don't have to pay it back.

Since both stimulus payments were sent out before the 2020 tax return was filed, the IRS used 2019 tax return information as qualification criteria. If your tax situation changed in 2020, you may qualify for more than you received. The birth of a child, a divorce, a big raise (or the loss of income), or other life changes could also impact your qualifications.

Remember, you won't have to pay back any overpayment and stimulus money is not taxed, so you have nothing to lose by reporting stimulus payments.

Reporting stimulus payment information in TaxAct

TaxAct asks a few quick questions about your stimulus payments. Once you answer those questions, TaxAct will let you know if you qualify for additional stimulus funds or if you received the correct amount.

I'm divorced - can I claim the Recovery Rebate Credit for my dependent?

The IRS Instructions for Form 1040 generally sets qualification rules based on who is the custodial parent for the tax year: 

Custodial and noncustodial parents. The custodial parent is the parent with whom the child lived for the greater number of nights in 2020. The noncustodial parent is the other parent. If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. See Pub. 501 for an exception for a parent who works at night, rules for a child who is emancipated under state law, and other details.

Your divorce agreement or other factors could impact eligibility. See Qualifying Child - of Noncustodial Parent for more information.

Still have questions?

Contact us at (319) 373-3600.